Monday, July 26, 2010

Christian Capitalism

I was talking to David, who mentioned Goldman Sachs, which reminded me of capitalism, which reminded me of Satan, which reminded me of school (or something like that).

All kidding aside, how can capitalism interface with Biblical principles?

For the love of money is a root of all kinds of evil. (New International Version)
For the love of money is a root of all kinds of evil. (International Standard Version)
For the love of money is the root of all evil. (King James Bible)
For a root of all the evils is the love of money. (Young's Literal Translation)
Now, let me make a basic statement about the nature of capitalism: Within the economic system of capitalism, people are motivated by the love of money. I think that's pretty fair.

Don't get me wrong. Capitalism has been as much a part of our nation as baseball and apple pie. It's driven our industry and our innovation. I've done quite a bit of thinking about how to optimize capitalism (which I'll relate later), but today I want to talk about some of its problems.

I'm reading a book about human motivation right now. The author makes a succinct statement that defines exactly the motivational energy that drives capitalism: 
In a world of perfect information and low transaction costs, the parties will bargain to a wealth-maximizing result. (26)
First, we should note the phrase "perfect information." The likelihood of a consumer having perfect informational about a Cornflakes box on aisle 7 in Walmart is about the same as Sarah Palin citing Huffington Post as her favorite news source or Pixar making a bad movie (although David did think Toy Story 3 was too scary).  That's the first difficulty we find with capitalism-- it's very difficult to arrange the setting in which it's designed to function.

Second, the book details how the statement made on page 26 isn't actually true; people don't operate that way. Studies in human motivation have been showing us for decades that human's are not "hyperrational calculator-brained" wealth maximizing robots (26). Economist Bruno Frey summed up the reason for this discrepancy,
Intrinsic motivation is of great importance for all economic activities. It is inconceivable that people are motivated solely or even mainly by external incentives. (28)

So that's the second difficulty we find with capitalism-- people don't actually behave according to the system's most basic assumption about human motivation. 

What I find most disturbing is why a "Christian nation" chose capitalism as its economic system in the first place. Regardless of which translation of 1 Timothy 6:10 we prefer, we find significant problems with the motivational force of the love of money-- it leads us into evil. So, why would we ever assume that the love of money would lead us into good and that capitalism, despite being grounded in an evil producing force, would succeed in making society better?

All other criticisms of capitalism aside, the Bible's is the most troubling to me. If we read about the early church in Acts, we find a close-knit community that functions like something reminiscent of a commune. In fact, I might call their miniature economic system "communist." 

Some point out that the Bible is a message to individuals and small groups rather than governments. Further, the United States is a democratic state (more specifically a Federal Constitutional Presidential Republic), not a theocracy. Just because my Bible says capitalism has a dubious motivational engine doesn't mean we ought to change our economic system.

These things are true. But though the Bible targets individuals and small groups, what is government if not a group of citizens banded together for the common good? I don't think a group like that is exempt from Biblical truth. Let's not forget, we are a government "of the people, by the people, [and] for the people." If "we the people" decide something ought to change, that's our prerogative.

What we must decide is whether the sub-prime triggered economic melt-down, the BP oil spill, golden parachutes, and misleading/manipulative advertising are isolated accidents, minor annoyances, or systemic problems indicating the need for change.

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